Market Wrap and Week Ahead (13 Sep)
12 Sep 2021
"Hot" On The Plate
More alarm bells sounded on US stock market on valuation and growth concerns
US markets have been on a tear this year, with major US stock indexes up more than 10% YTD, and about doubled from the COVID-19 trough in March 2020. The fast run up had made this bull market the fastest bull market according to an analysis by CNBC (just 354 trading days vs on average of 1,000 trading days). While investors had attributed the rise to the easy money policy, with central banks flooding the market with unprecedented stimulus, the rise has still draw concerns by strategists in recent days amidst (i) Valuations at historical extremes (ii) Concerns of a slowing economic growth and (iii) Anticipation of a stimulus taper by the US FED
Valuations at historical extremes
Concerns of a slowing economy
According to the US latest Beige Book, the Fed noted a "deceleration in economic activity largely attributable to a pullback in dining out, travel and tourism in most districts, reflecting safety concerns due to rise of the Delta variant". Concerns of US slowing growth were also voiced out by economists who lowered their economic growth forecasts for 3Q to 5% (from 6.8%) and 4Q estimate to 5.3% (from 5.6%) based on median forecasts from Bloomberg's monthly survey.
Apple falls on unfavorable court ruling for its app store
Pulling down the index is also Apple which was down more than 3% on Friday after a US court ruling in Epic Games' antitrust lawsuit which would not allow Apple to force developers to use in-app purchases. (i.e. Apple can no longer prohibit developers from including links that drive users away from Apple’s store, where the company takes 15% to 30% of gross sales.) Apple forms about 11% of the overall Dow Index. OVer the last few weeks, Apple and Alphabet's Google has been under pressure over their control over app stores, with analysts believing the US Congress may seek to force the app stores to open up their payment mechanisms as well as allow for other competing app stores.
14 Sep: On the economic data front, US will be reporting its inflation data on Tuesday, which will be closely watch, given it is a key metric/data point affecting US Fed's decision of when to taper. Currently, the market is expecting US Fed to formerly announce its tapering of its bond-buying program in Nov/Dec 2021, after US reported a much weaker jobs report in August (just 235,000 jobs created, 500,000 less than expected)
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